12) Employee Benefit Plans

Defined Contribution Plans

The Partnership has two 401(k) plans that cover eligible non-union and union employees. Subject to IRS limitations, the 401(k) plans provide for each participant to contribute from 0% to 60% of compensation. For most participants, the Partnership generally can make a 4% (to a maximum of 5.5% for participants who had 10 or more years of service at the time the Defined Benefit Plans were frozen and who have reached the age 55) core contribution of a participant’s compensation and generally can match 2/3 of each amount a participant contributes up to a maximum of 2.0% of a participant’s compensation. However, participants at specific operating locations that participate in these plans are only eligible for an employer discretionary pretax matching contribution and/or an annual employer discretionary profit sharing contribution. The Partnership’s aggregate contributions to the 401(k) plans during fiscal 2013, 2012, and 2011, were $4.9 million, $4.5 million, and $4.7 million, respectively.

Management Incentive Compensation Plan

The Partnership has a Management Incentive Compensation Plan. The long-term compensation structure is intended to align the employee’s performance with the long-term performance of our unitholders. Under the Plan, employees who participate shall be entitled to receive a pro rata share of an amount in cash equal to:

•

50% of the distributions (“Incentive Distributions”) of Available Cash in excess of the minimum quarterly distribution of $0.0675 per unit otherwise distributable to Kestrel Heat pursuant to the Partnership Agreement on account of its general partner units; and

•

50% of the cash proceeds (the “Gains Interest”) which Kestrel Heat shall receive from the sale of its general partner units (as defined in the Partnership Agreement), less expenses and applicable taxes.

The pro rata share payable to each participant under the Plan is based on the number of participation points as described under “Fiscal 2013 Compensation Decisions—Management Incentive Compensation Plan.” The amount paid in Incentive Distributions is governed by the Partnership Agreement and the calculation of Available Cash.

To fund the benefits under the Plan, Kestrel Heat has agreed to forego receipt of the amount of Incentive Distributions that are payable to plan participants. For accounting purposes, amounts payable to management under this Plan will be treated as compensation and will reduce net income. Kestrel Heat has also agreed to contribute to the Partnership, as a contribution to capital, an amount equal to the Gains Interest payable to participants in the Plan by the Partnership. The Partnership is not required to reimburse Kestrel Heat for amounts payable pursuant to the Plan.

The Plan is administered by the Partnership’s Chief Financial Officer under the direction of the Board or by such other officer as the Board may from time to time direct. Determination of the employees that participate in the Plan is under the sole discretion of the Board of Directors. In general, no payments will be made under this plan if the Partnership is not distributing cash under the Incentive Distributions described above.

The Board of Directors reserves the right to amend, change or terminate the Plan at any time. Without limiting the foregoing, the Board of Directors reserves the right to adjust the amount of Incentive Distributions to be allocated to the Bonus Pool if in its judgment extenuating circumstances warrant adjustment from the guidelines, and to change the timing of any payments due thereunder at any time in its sole discretion.

The Partnership distributed to management and the general partner Incentive Distributions of approximately $330,000 during fiscal 2013, $277,000 during fiscal 2012, and $261,000 during fiscal 2011. Included in these amounts for fiscal 2013, 2012, and 2011, were distributions under the management incentive compensation plan of $165,000, $138,000 and $130,000, respectively, of which named executive officers received approximately $119,000 during fiscal 2013, $99,000 during fiscal 2012, and $92,000 during fiscal 2011. With regard to the Gains Interest, Kestrel Heat has not given any indication that it will sell its general partner units within the next twelve months. Thus the Plan’s value attributable to the Gains Interest currently cannot be determined.

Multiemployer Pension Plans

We contribute to various multiemployer union administered pension plans under the terms of collective bargaining agreements that provide for such plans for covered union-represented employees. The risks of participating in these multiemployer plans are different from single-employer plans in that assets contributed are pooled and may be used to provide benefits to employees of other participating employers. If a participating employer stops contributing to the plan, the remaining participating employers may be required to bear the unfunded obligations of the plan. If we choose to stop participating in a multiemployer plan, we may be required to pay a withdrawal liability based on the underfunded status of the plan. However, cessation of participation in a multiemployer plan and subsequent payment of any withdrawal liability is subject to the collective bargaining process.

The following table outlines our participation and contributions to multiemployer pension plans for the periods ended September 30, 2013, 2012 and 2011. The EIN/Pension Plan Number column provides the Employer Identification Number (“EIN”) and the three-digit plan number. The most recent Pension Protection Act Zone Status for 2013 and 2012 relates to the plans’ two most recent fiscal year-ends, based on information received from the plans and are certified by the plans’ actuary. Among other factors, plans in the red zone are generally less than 65 percent funded, plans in the yellow zone are less than 80 percent funded, and plans in the green zone are at least 80 percent funded. The FIP/RP Status Pending/Implemented column indicates plans for which a financial improvement plan (“FIP”) or a rehabilitation plan (“RP”) is either pending or has been implemented. Certain plans have been aggregated in the All Other Multiemployer Pension Plans line of the following table, as our participation in each of these individual plans are not significant.

For the Westchester Teamsters Pension Fund, Local 553 Pension Fund and Local 463 Pension Fund, we provided more than 5 percent of the total plan contributions from all employers for 2013, 2012 and 2011, as disclosed in the respective plan’s Form 5500. The collective bargaining agreements of these plans require contributions based on the hours worked and there are no minimum contributions required.

Pension Protection Act
Zone Status

FIP / RP Status

Partnership Contributions
(in thousands)

Pension Fund

EIN
/ Pension Plan
Number

2013

2012

Pending /
Implemented

2013

2012

2011

Surcharge
Imposed

Expiration Date of
Collective-
Bargaining
Agreement

New England Teamsters & Trucking Industry Pension Fund

04-6372430
/ 001

Yellow

N/A

2,709

2,532

2,512

3/31/2014

Westchester Teamsters Pension Fund

13-6123973
/ 001

Green

N/A

820

771

817

1/31/2014

Local 553 Pension Fund

13-6637826
/ 001

Green

N/A

2,729

2,152

2,082

1/15/2014

Local 463 Pension Fund

11-1800729
/ 001

Green

N/A

146

155

2/28/2014

All Other Multiemployer Pension Plans

1,614

1,627

1,364

Total
Contributions

8,018

7,237

6,930

Defined Benefit Plans

The Partnership accounts for its two frozen defined benefit pension plans (“the Plan”) in accordance with FASB ASC 715-10-05 Compensation-Retirement Benefits. The Partnership has no post-retirement benefit plans.

The following table provides the net periodic benefit cost for the period, a reconciliation of the changes in the Plan assets, projected benefit obligations, and the amounts recognized in other comprehensive income and accumulated other comprehensive income at the dates indicated using a measurement date of September 30 (in thousands):


Debit / (Credit)	Net Periodic Pension Cost in Income Statement			Cash			Fair Value of Pension Plan Assets			Projected Benefit Obligation			Other Comprehensive (Income) / Loss			Gross Pension Related Accumulated Other Comprehensive Income
Fiscal Year 2011
Beginning balance							$	49,323		$	(65,922	)				$	33,212

Interest cost		2,993									(2,993	)
Actual return on plan assets		(3,984	)					3,984
Employer contributions					(3,224	)		3,224
Benefit payments								(4,097	)		4,097
Investment and other expenses		(377	)								377
Difference between actual and expected return on plan assets		597												(597	)
Anticipated expenses		246									(246	)
Actuarial loss											(3,191	)		3,191
Amortization of unrecognized net actuarial loss		2,765												(2,765	)

Annual cost/change	$	2,240		$	(3,224	)		3,111			(1,956	)	$	(171	)		(171	)

Ending balance							$	52,434		$	(67,878	)				$	33,041

Funded status at the end of the year										$	(15,444	)

Fiscal Year 2012
Interest cost		2,858									(2,858	)
Actual return on plan assets		(8,727	)					8,727
Employer contributions					(3,365	)		3,365
Benefit payments								(4,223	)		4,223
Investment and other expenses		(374	)								374
Difference between actual and expected return on plan assets		5,075												(5,075	)
Anticipated expenses		262									(262	)
Actuarial loss											(6,650	)		6,650
Amortization of unrecognized net actuarial loss		2,751												(2,751	)

Annual cost/change	$	1,845		$	(3,365	)		7,869			(5,173	)	$	(1,176	)		(1,176	)

Ending balance							$	60,303		$	(73,051	)				$	31,865

Funded status at the end of the year										$	(12,748	)

Fiscal Year 2013
Interest cost		2,477									(2,477	)
Actual return on plan assets		(332	)					332
Employer contributions					(3,476	)		3,476
Benefit payments								(4,083	)		4,083
Investment and other expenses		(285	)								285
Difference between actual and expected return on plan assets		(3,475	)											3,475
Anticipated expenses		302									(302	)
Actuarial gain											7,157			(7,157	)
Amortization of unrecognized net actuarial loss		2,655												(2,655	)

Annual cost/change	$	1,342		$	(3,476	)		(275	)		8,746		$	(6,337	)		(6,337	)

Ending balance							$	60,028		$	(64,305	)				$	25,528

Funded status at the end of the year										$	(4,277	)

At September 30, 2013 and 2012, the amounts included on the balance sheet in other long-term liabilities were $4.3 million and $12.7 million, respectively.

The $25.5 million net actuarial loss balance at September 30, 2013 for the two frozen defined benefit pension plans in accumulated other comprehensive income will be recognized and amortized into net periodic pension costs as an actuarial loss in future years. The estimated amount that will be amortized from accumulated other comprehensive income into net periodic pension cost over the next fiscal year is $2.1 million.


	September 30,
Weighted-Average Assumptions Used in the Measurement of the Partnership’s Benefit Obligation	2013			2012			2011
Discount rate at year end date		4.45	%		3.50	%		4.35	%
Expected return on plan assets for the year ended		7.00	%		7.75	%		7.75	%
Rate of compensation increase		N/A			N/A			N/A

The expected return on plan assets is determined based on the expected long-term rate of return on plan assets and the market-related value of plan assets determined using fair value.

The Partnership’s expected long-term rate of return on plan assets is updated at least annually, taking into consideration our asset allocation, historical returns on the types of assets held, and the current economic environment. The Partnership revised its return on plan assets assumption to 5.75% per annum effective fiscal year 2014.

The discount rate used to determine net periodic pension expense for fiscal year 2013, 2012 and 2011 was 3.50%, 4.35%, and 4.70% respectively. The discount rate used by the Partnership in determining pension expense and pension obligations reflects the yield of high quality (AA or better rating by a recognized rating agency) corporate bonds whose cash flows are expected to match the timing and amounts of projected future benefit payments.

The Plan’s objectives are to have the ability to pay benefit and expense obligations when due, to maintain the funded ratio of the Plan, to maximize return within reasonable and prudent levels of risk in order to minimize contributions and charges to the profit and loss statement, and to control costs of administering the Plan and managing the investments of the Plan. The strategic asset allocation of the Plan (currently 80% domestic fixed income, 15% domestic equities and 5% international equities) is based on a long-term perspective, and as the Plan gets closer to being fully funded, the allocations have been adjusted to lower volatility from equity holdings.

The fair values and percentage of the Partnership’s pension plan assets by asset category are as follows (in thousands):


Asset Category at September 30, 2013	Level 1		Level 2		Level 3		Total		Concentration Percentage
Corporate and U.S. government bond fund (1)		47,364		—		—		47,364		79	%
U.S. large-cap equity (1)		9,123		—		—		9,123		15	%
International equity (1)		3,082		—		—		3,082		5	%
Cash		459		—		—		459		1	%

Total		60,028		—		—		60,028		100	%

(1)	Represent investments in Vanguard funds that seek to replicate the asset category description.

The Partnership expects to make pension contributions of approximately $2.7 million in fiscal 2014.

Expected benefit payments over each of the next five years will total approximately $4.4 million per year. Expected benefit payments for the five years thereafter will aggregate approximately $21.2 million.